New Delhi: The Central government has amended the Payment and Settlement Systems (PSS) Act, 2007 to introduce a 0.4% Merchant Discount Rate (MDR) on person-to-merchant (P2M) transactions above Rs 2,000.
Under the P2M structure of the new framework, a 0.4% MDR will apply to UPI transactions above Rs 2,000. For transactions of Rs 75,000 and above, the MDR will be capped at Rs 300 per transaction.
The MDR will be effective from October 15, 2026.
The National Payments Corporation of India (NPCI) has clarified that no charges will be levied on person-to-person (P2P) transactions, irrespective of transaction value.
The newly-introduced MDR will be paid by merchants to their acquiring banks, and cannot be passed on to customers.
For example, the merchant will have to pay Rs 12 as MDR on a Rs 3,000 UPI payment. On a Rs 50,000 payment, the MDR will be Rs 200.
On a Rs 1 lakh transaction, the 0.4% MDR calculation comes to Rs 400, but the merchant will pay Rs 300 because of the cap applicable to transactions of Rs 75,000 and above.
The bottomline for consumers is that they can continue to use UPI free of charge, they will pay zero transaction fee for making UPI payments.
You will not be charged for scanning QR codes at local markets, street vendors or small retail shops, regardless of the purchase value.
Banks have been advised to ensure that merchants do not pass MDR charges on to customers.
UPI app providers will also not be allowed to levy a platform fee or any other charge on UPI payments.
